Option Value, Policy Uncertainty, and the Foreign Direct Investment Decision

Option Value, Policy Uncertainty, and the Foreign Direct Investment Decision

In this paper we analyse the impact of policy uncertainty on foreign direct investment strategies. The paper follows the real options approach, which allows to investigate the value to a firm of waiting to invest and/or disinvest, when payoffs are stochastic due to political uncertainty and investments are partially reversible. Across the board we find that political uncertainty can be very det...

Foreign Direct Investment and Competition Policy

Background A synergy exists between investment liberalisation and the effective application of competition policy. An effective competition policy does not only remove obstacles to entry, but can also facilitate foreign investment flows by providing a predictable legal and regulatory environment that reduces the scope of arbitrary decision-making. Regulation of the business practices of investo...

The Country Risks and Foreign Direct Investment (FDI)

T he importance of foreign direct investment (FDI) in developing countries has begun to spread very rapidly, especially after the transition of command economies countries into open markets. Many countries see attracting FDI as an important element in their strategy for economic growth because FDI is widely regarded as an amalgamation of capital, technology, marketing, and management...

Foreign Direct Investment and Cost Uncertainty: Correlation and Learning Effects

Institutional Uncertainty, Economic Integration, and Vertical Foreign Direct Investment Decisions

In this paper we analyse the impact of institutional uncertainty on vertical foreign direct investment (FDI) strategies. We also consider the impact of economic integration upon FDI decisions. The paper follows the real options approach, which allows investigating the value to a firm of waiting to invest and/or disinvest, when payoffs are stochastic due to institutional uncertainty and investme...